Health Care Crisis Hits Home
by Mark Scaramella, April 29, 2010
The unthinkable has been thunk. The supervisors discussed the elimination of healthcare coverage for County retirees under the age of 65.
The over-65s took some serious whacks, too.
The County had formed an “ad-hoc” committee of County Treasurer Shari Schapmire, retired Auditor Dennis Huey, a person identified as “Moratta,” and former Public Health Director Carol Mordhorst.
Their grim recommendations were presented to a room full of disgruntled retirees last Tuesday afternoon. The committee was as unhappy with the bad news as the retirees.
Until this year, County employees hired before 1998 qualified for County-paid health insurance when they retired. Those hired after 1998 had already been axed as the first flock of Mendocino County's scrawny fiscal chickens arrived in their thin roosts.
Ever increasing healthcare rates, combined with a dramatic drop in stock market returns upon which the pension fund's health payments largely depended, along with the County's own mismanagement and ever increasing poverty, made this latest round of retiree cuts inevitable.
CEO Carmel Angelo solidified the bad news with the numbers. She said that there was $4.3 million left in the fund from which retiree healthcare is paid (for just over 800 retirees) and, at present rates, it would only last through the end of 2010.
Something has to be done.
Having ignored the looming problem for years at the supervisory level, the County’s remaining options have been reduced to just one: stop paying for retiree healthcare — in two phases.
The ad-hoc committee came up with the following form of slow death: (1) Cut the County's payments to $100 per month for Medicare-eligible retirees for the next 14 months and move them into a discount MediGap insurance plan which they’ll have to pay the rest of, and (2) cut County payments for non-Medicare-eligible retirees (under 65) to $200 for the next 14 months and move them into the County employee health insurance pool. When these transfers are complete in 14 months at the end of 2011 all retirees will be set adrift, at the mercy of the health insurance companies.
The Supervisors — with the conspicuous exception of Supervisor David Colfax — discussed minor variations in how to stop paying for healthcare but got nowhere. The only practical option was the one the ad-hoc committee proposed. The unencouraging phrase, “death spiral” was invoked to describe the implications of the end of the County's contribution to the healthcare coverage of both its retired and still employed workers, some of whom may be forced to drop coverage and leave the remainder with even higher costs.
Borden Darm of Mercer Health in San Francisco, yet another of the County's seemingly endless and inevitable consultants, explained that “Typically, if healthy people opt out of the program, a less healthy population becomes the base and that can produce a ‘death spiral.’ Perhaps some people can obtain coverage through an employed spouse. Then there’s not as much impact. But if a person has 'health risk factors' there is no coverage available in the private market so they’ll have to stay in the plan.”
Darm didn’t think the County would see the “death spiral” of its insurance plan. But nobody really knows if the plan will survive much longer or long enough for whatever relief the nebulous remedies of Obamacare might bring in 2014.
One retiree, former groundskeeper Keith Solinen, told the Board that not only had line employees accepted lower wages in exchange for continued healthcare in retirement, but that he had based his retirement decision on it. Solinen said he makes a lean $2300 a month in retirement and already pays $171 a month for his share of healthcare costs. With the County’s contribution drastically cut, he will be paying almost $600 a month starting in September and by the end of 2011 he will be paying almost $750 per month, which represents 31% of his pension. “You have changed the rules,” said Solinen. “How can you balance your budget on the backs of retirees? There must be some compromise that would be better than this. This is despicable. And I mean it!”
Multiply Mr. Solinen by many millions and you have the current state of the American economy, a mammoth Ponzi now winding down as, we learned last recently, the boys at the SEC, the boys paid lots of money to keep the wolves from all us sheep, all those smart SEC boys with diplomas from fancy colleges, all those boys spent a good part of their work days watching pornography on the internet when they were supposed to be watching Goldman-Sachs and Bernie Madoff.
A parade of similarly irate retirees followed the apoplectic groundskeeper to the podium.
Retired County Treasurer Irene Lang called the plan that the retirees had until now “a Cadlllac plan paid for by earnings of the retirement fund,” adding that pension costs had risen as employee pay has risen dramatically in recent years which, she said, “does affect the unfunded pension liability which depends on salaries which have gone up, deservedly so.”
Linda Barnett, President of the County’s Retirement Association, told the board, “We feel betrayed. To take something away that we believed in will leave a lot of people destitute. I don't know another way to handle this, but that's the feeling.”
Tom Liberatore, retired County garage mechanic, told the Board, “We acted in good faith. Now it's gone the other way. You've opted out on us. There’s gotta be a better way somewhere.”
Retiree Ann Fuller pointed out, “This didn't happen overnight. People knew what was coming. But retirees were never told that there may not be health insurance, or that 30% of our retirement may have to go to pay for it. We'd like to change our minds and have our jobs back if we'd known this. Think about bringing some of us back. If these cuts go through, why can't I have my job back?”
Retired welfare fraud investigator Terry Melvin said the Board was “pulling the rug out from underneath us. People are scared. You’re asking them to pay 30% of their income or more. I'm mad. We gave our lives to our jobs. You can't just walk away from us. Listen and help. We don't have options.”
Retired Sheriff’s Deputy Ron Parker, said, “We thought these benefits would be paid. Then things went bad and you never told anybody. Recent retirees are really going to be shorted. I have this MOU from 1995 and 1996 which says the Board is required to give my wife $256 a month for rest of her life. You made promises and you take them back. Is the shoe going to drop on our retirement check next?”
Probably, Ron, because that fund is in roughly the same precarious shape as the healthcare “trust.”
Retiree Lorelei Hammond was next up. “I’m a retiree but I’m not retired. Never did I think my insurance would cost more than my mortgage payment. Never! I worked for the County before the “Slavin” study. That’s a good name, ‘Slavin' away.’ How could the Board determine they have no fiduciary responsibility to not fund healthcare? We only found out later that you didn’t. Shame on us for not asking questions about that before. But this is really unprecedented. Don’t forget, your current workforce is watching this now very carefully. You are sending a message to a lot of other people besides us.”
Retiree Paul Bates asked, “Does anyone have a figure on what percentage of the budget this will save by throwing all these people under the bus? I've heard it’s 2%. If it's 2%, you could find a way to handle 2%. I know about the services, and they're needed. But if you don't have it, you don't have it. Just cut what it takes where it is. You’ve got to keep up with what you've promised people.”
Current employee Sharon Moyle, who has been with Social Services for 33 years said, “I'm not retired. I did not retire last month because of this insurance issue. If I have to pay $700 a month for insurance, I'm better off working. Current employees are very concerned about the insurance issue. They are not going to be very interested in retiring to save the County money if you do this.”
Retired Clerk/Recorder/Assessor Marsha Wharff weighed in. “We’re angry. We were promised this. That's what the flyers said we'd get when we hired on. For all those years we thought we'd get this. Now with only three months notice, you want people to pay hundreds of dollars more? You just have to come up with it. Many people don't have it and can't pay at all. We were promised this. We thought it was a right and now it's being taken away. Pay for it like we were promised.”
Retired Human Resources Department Head Dave Johnson, referring to the short tenure of the County’s many beleaguered Personnel Managers who followed him, bragged that he was “the only HR director who ever retired from County Service.” Then he turned to current Personnel Manager Teresia Haase sitting next to him and scoffed, “Good luck!” drawing a major guffaw from the retiree-audience.
Mr. Johnson described an old promise that health care for retirees was a benefit for those who lasted long enough to become vested in the retirement plan. “It’s the next thing to a legal right,” said Johnson. “And it’s a serious mistake to make these cuts without consideration of the obligations that were made years ago. With this there will be those who can't afford to retire. If you're counting on retirees to save money, it won't happen. The money you intended to save on the salary line won't be there.”
Former Public Health Director Carol Mordhorst explained that she was a non-voting member of the ad-hoc retiree health committee. “I heard lots of sad stories,” said Mordhorst. “And I saw things that could have been done to this plan much earlier. Why didn’t you put the Medicare retirees into MediGap long ago?” Ms. Mordhorst added that more emphasis on prevention and health would reduce the plan’s costs, adding that the problem was that “no one was responsible for this plan. Things can still be done. My fear is that if retirees pay for whole thing, prices will spiral and the insurance will dry up.”
Long-standing County finance critic John Dickerson told the board (again) that the County funding of the retiree health plan was “deeply flawed,” repeating that there were no “excess earnings” because the average pension return has been 4.4%, well short of the targeted 8%. “15 professionals from all political persuasions have looked at this and they took five minutes to see how absurd it is,” said Dickerson. “The pension fund was raided to pay for this health insurance. You can't borrow from the future to pay for today. It's unconstitutional.”
In fact, the political left, such as it exists in Mendocino County, has pointed out for years that pegging healthcare coverage and retirement funds to the stock market was a crap shoot the County would eventually lose.
Responding to a question from Supervisor John McCowen, County Counsel Jeanine Nadel insisted, however, that, “Historically, it’s clear that this is not a vested right. Just because it's granted does not create a vested benefit. The pension is vested. Healthcare is not.”
McCowen replied, “We may end up in a court of law and a judge will decide.” McCowen then went on to justify the cuts the Board was about to make, saying he understood the sense of anger and betrayal and that retirees believed it was a promise. “If I were sitting out there I'd feel the same way,” said McCowen. adding that previous decisions (which he was not involved with at all) were “done with best of intentions.”
In fact, they were done out of ignorance and shallow, unfounded fiscal optimism.
McCowen pointed out that on average non-Medicare eligible retirees will have to pay an estimated $731 per month. And overall the under-65 portion of the 805 retirees who now get healthcare will pay at least 30% of their income to continue their healthcare.
“Probably things should have been done years ago to extend the life of the plan,” said McCowen. “But now we're in the position as bad guys of pulling the rug out from under everybody. But we didn't create the rug.”
Angelo repeated that maybe in the year 2014 when Obama’s insurance company run “health exchanges” kick in something could happen and affordable healthcare would re-appear “like magic.”
But none of the options mentioned by the Board or the retirees were seriously considered, and the Board unanimously but reluctantly passed the ad-hoc committee recommendations to stretch out the remaining $4.3 million for a few more months with an immediate cost increase on all retirees. And an even bigger one in 14 months.
* * *
Several less controversial items were also discussed last Tuesday.
California State Association of Counties (CSAC) legislative analyst Cara Martinson told the Board that a broad range of new fees have been proposed by the state legislature to help close the state’s budget gap. “Even though there’s a budget crisis,” said the smiling Ms. Martinson, “that hasn’t stopped the legislature from introducing thousands of bills,” a statement which was apparently designed to be encouraging.
Ms. Martinson also informed the board that CSAC has formed a medical marijuana working group addressing a wide variety of pot related issues. “There’s lots of gray area in the law,” said Martinson deadpan, “but it’s a venue for sharing and documentation. We are compiling the various county marijuana ordinances.”
Lord Jesus Christ spare us!
Referring to Norman de Vall’s earlier proposal that the County join with Humboldt and Trinity counties in a tri-county attempt at sane pot policy, Supervisor John Pinches said, “I’m not sure we need that if CSAC is taking the lead. But if they don’t, we'll bypass CSAC and go forward.”
The youthful Ms. Martinson replied that CSAC is now on Facebook and Twitter and also has a new blog.
Lord Jesus Christ give us this day our twitter, our tweet, our Facebook friends. But not our healthcare.
Maura Moody, a senior staffer for the National Marine Fisheries Service who's working to keep coho salmon from becoming extinct on the Northcoast, ran through a slide presentation saying, basically, that a mere 400 of the formerly abundant fish returned to spawn in all of Northern California last year, concluding that the once plentiful coho salmon “is becoming the condor. We’re not dealing with recovery anymore, but extinction prevention.”
Supervisor John Pinches was indignant. “What about what's going on out in the ocean?” asked Pinches. “Big foreign boats with big nets — why don't you mention it in your presentation? It’s not even listed as a problem. A 70% decline is more than what could be contributed to by habitat loss. Don't forget, WE won the war. This plan is doomed for— We'll end up with NO fish!
Ms. Moody replied: “We looked at it. We’re not ignoring it.”
Her NMFS boss, Richard Butler, added, “We were not aware that that is a problem for coho specifically. But we hear you.”
At the end of the day the Board listened to County Water Agency head Roland Sanford say that assembling the funding for the study of increasing the capacity of Lake Mendocino was going so slowly that it would be at least 20 years before enough money to conduct the study was accumulated.
Lame duck Supervisor Colfax finally roused himself to make his one comment for the day: “I think this [continuing to provide a token $25k per year to the study fund] takes us in a direction I thought we were going, which is nowhere.” ¥¥